HKSAR Financial Secretary's Opening Remarks in the 2008 World Credit Union
I am indeed delighted to welcome the World Credit Union to Hong Kong, Asia's world city. We are honoured, deeply honoured, that the World Council of Credit Unions has chosen our city for its first annual conference in Asia for three decades. The flag parade that we have just had the pleasure of seeing is, indeed, a great way to kick off this very prestigious event. I, for one, was reminded of the opening ceremony of the Olympic Games when the national flags of participating teams enter the arena in a show of global unity.
With this in mind, Hong Kong is an even more appropriate venue for this Conference. In less than a month, the Beijing Olympics will get under way, and Hong Kong will be a proud co-host city for the Games with the staging of the Olympic Equestrian Events. There are still a few weeks to go before the Beijing Games begin, but this conference is something of an Olympics for credit unions, with more than 1,300 participants from some 50 countries taking part.
A warm welcome to Hong Kong to you all.
No doubt, many of us aspire to the Olympic goal of building a better world in a spirit of understanding, friendship, solidarity and fair play.
For the World Council of Credit Unions, the mission is to seek, to improve the social development for all people through the provision of high-quality and affordable financial services.
I am confident that Hong Kong has an important role to play in helping to achieve this goal.
In the next few minutes, I will highlight the importance of the financial services sector to Hong Kong, and some of the ways that we are diversifying products and improving the efficiency of services.
First, allow me to give you a brief overview of credit unions in Hong Kong. I believe there is good potential for growth in this area. However, the development of credit unions here has been somewhat restricted due to the high concentration of banks and financial institutions, which offer a wide range of services to all concerned.
At the same time, there are still 41 credit unions in the city, mainly composed of employees of government departments, large corporations and members of neighbourhood organisations and local churches.
Local membership is about 66,000 with a total capital of some $5 billion. With a penetration rate of about one per cent of the population, there is certainly room for the expansion of credit unions in Hong Kong.
Credit unions have also been spared the worst effects of the current global market turmoil brought on by the sub-prime lending problem in the US. Good governance, close relationship with members and the promotion of sensible use of credit are important factors.
Hong Kong is also in a pretty good shape, despite the global economic downturn. This is thanks largely to the resilience of our financial services sector. Although we were hit hard by the Asian financial crisis a decade ago, our financial services sector has rebounded strongly and remains one of the four pillars of our economy. It contributes around 13 per cent of our GDP and some 180,000 people work in this sector.
Open markets, good corporate governance and a transparent regulatory regime are among our key attributes as an international financial centre.
In recent years, Hong Kong has emerged as an important player in global round-the-clock financial trading.
This is partly down to good luck. We are in the right place at the right time. Our geographical location in the Asian timezone, midway between the financial powerhouses of London and New York makes Hong Kong an ideal partner in today's 24-hour global financial network.
We do not rely solely on natural endowment. Our good fortune in time and place is combined with a great deal of hard work in producing the best possible investment environment.
We must be doing something right, because in the league of international financial centres, Hong Kong is ranked third by the Global Financial Centres Index published by the City of London Corporation. Only London and New York are ranked higher.
Hong Kong is also consistently ranked as the world's freest economy. The US-based Heritage Foundation has placed Hong Kong at the top of the league table for each of the past 14 years.
At the heart of our financial services sector is the robust and vibrant stock market. Although we are a relatively small city with a population just short of seven million, Hong Kong possesses the world's seventh largest stock market and third largest in Asia by market capitalisation. Market cap at end of May was more than US$2.3 trillion.
In terms of equity funds raised in 2007, Hong Kong was ranked second in Asia and fifth globally with total funds raised at about US$9 billion.
Hong Kong is also a leading asset management centre in Asia. The latest available figures show that our combined fund management business amounted to some US$800 billion at end of 2006, representing 36 per cent growth over 2005.
Our decision to abolish estate duty and exempt offshore funds from profits tax since early 2006 has helped to attract foreign capital to Hong Kong and encourage investors to hold assets here.
Perhaps our biggest attraction for investors is a low and simple tax system. Top rates for salaries tax is capped at 15 per cent and profits tax at 16.5 per cent. There is no VAT, no GST, no capital gains tax and only income sourced in Hong Kong is taxable here.
We also are a safe, stable and law-abiding society. And since reunification with the Mainland in 1997, Hong Kong has retained the common law legal system based on the English system. Our judiciary is fiercely independent, and we take a zero-tolerance approach to corruption. Our Independent Commission Against Corruption is highly regarded in the international community.
As well as ensuring a level playing field for entrepreneurs and investors, we are also diversifying our financial services. As China's most important city for global finance, we have an important job to do in more closely aligning our two financial systems. This will help us become a more efficient platform for inflows as well as outflows of capital across the boundary.
For example, since 2004 we have been developing Renminbi business in Hong Kong. Virtually all retail banks offer Renminbi services, and beginning last year, we became the first place outside the Mainland to have a Renminbi bond market.
We are continuing to develop Renminbi business in collaboration with our counterparts across the boundary.
Looking East, another relatively new and exciting area for us is Islamic finance. There is good potential for introducing Islamic financial products in Hong Kong and for developing a market for Islamic bonds or sukuk. The response so far has been encouraging.
Last November, a major local bank launched the first Islamic fund here. In six months, the fund had grown more than 10fold since its launch with the size of the fund exceeding US$54 million by end of April.
The investment holding arm of the Malaysian Government issued an exchangeable sukuk of US$550 million in the Hong Kong Stock Exchange in March this year. It was the first sukuk offering exposure to China's growth through the Mainland equities listed on the local stock market. There was a good response from Middle Eastern investors and the sukuk was oversubscribed by 10 times.
So ladies and gentlemen, I have covered just a few of the areas that are important to Hong Kong as an international financial centre, and as China's No.1 city for global finance.
No doubt, this Conference - with its list of esteemed speakers - will explore some of these as well as other issues in great depth in the next couple of days.
I hope you all have an enjoyable stay here in Hong Kong and, in keeping with the Olympic atmosphere in Hong Kong at the moment, I wish you the best World Credit Union Conference ever.
So, e njoy your stay in Hong Kong, and do shop a lot. Thank you very much.